• by Tom Hespos , March 31, 2003

The warning signs seem to be all around us. AOL has evidently decided that its magazine content is better at generating loyalty among AOL members and magazine subscribers than it is at generating web advertising revenue. Your average web surfer can't get to Entertainment Weekly or People content online unless they subscribe to AOL or buy the magazine. Apparently, there are plans to do much the same with a number of additional AOL-Time Warner magazine sites.

Several wide-reaching content players are implementing paid content models. Much has been written about Salon.com's hybrid model, as well as Yahoo's Platinum Services. And have you noticed how many wide-reaching web services that were once free are now on the subscription or pay-per-play model? It's even getting tough to find sites that send free online greeting cards. Jupiter predicts that the paid content market will jump 30% to a total of $2 billion this year, and the OPA is making quite a bit of noise about paid content models as well.

To the casual observer, it's obvious that the "free ride" brought about by the Internet land grab is now coming to an end. Or is it? Can publishers monetize their content through advertising?

One thing I've noticed about the Internet publishing landscape lately is a correlation between publishers who are doing well with the advertising model and publishers who know a great deal about their audience. It seems that publishers who are able to carve up their audience into desirable segments can stick to the ad-supported model, while those that run a lot of untargeted ROS campaigns are struggling.

This makes sense. In general, paying advertisers that simply want to reach oxygen breathers of any demographic are taking advantage of prevailing market conditions and are paying on a performance-based model or on a low CPM. We see many top-tier publishers running CPC pop-ups and such from advertisers they wouldn't have even talked to three years ago. It's getting tougher for publishers to support their companies on this revenue. Meanwhile, certain desirable audiences are still commanding a premium and the publishers that can identify and reach these audiences are doing well.

None of this would bug me, except for the fact that many of the suffering publishers can give their revenue a boost by simply auditing their data resources. They can learn so much about their users simply by observing their behavior, leveraging declared data and conducting online surveys. Armed with such data, publishers can then offer premium audiences to advertisers. So why haven't most mainstream online publishers learned to embrace data?

One thing's for sure - web users don't like it when something that was once ad-supported moves to a paid content model. I'd probably cringe after seeing the kind of hate mail that publishers get when they switch from ad-supported to paid. That said, switching to a paid model is better than hemorrhaging money and eventually going out of business.

My message to web publishers this week is simple: Before you implement a paid content model, consider all of your data resources. Do you know more about your site's audience than other publishers? If so, consider implementing technology that will make these audiences targetable so that you can offer them to advertisers. It may save your ad-supported model and keep your content free.